Response

Running head: KPI AND KRI 1

KPI AND KRI 3

RESPONSE 1

Key Performance Indicators

Mainly there are six tips to set the key performance indicators those are the first one is to review the progress for achieving our strategic plan. Here the person has certain goals to reach their identity. The second one is you have to select your key performance indicators which are related to your strategy in here there will be a financial measure that is concerned with profitability. The third one is mathematical determine for five-year target in key performance indicator it is most important and it is a course over five years. The fourth one works backward from a five-year target to get profit by year by year target in here there will be a scenario to reach your target (Stricker, 2017).

The fifth one is nail down to the rest for your financial key performance indicators by using the above tips in here you have to determine your profit target and there will be assumptions. And the final sixth one is you have to take time for a sanity check. By using key performance indicators we can easily measure our development of business it is very tricky and important (RUSU, 2019) .

Key Risk Indicators

The key risk indicators were used in organizations and in business to calculate and measure the risks in organizations. These key risk indicators were used in every were for example mostly the key risk indicators were used in banks to protect the money. For example value of risk indicator, it is a type of investment risk this risk is based on the value amount of probability. The current ratio is a type of liquidity risk in here it will express the ratio of amount, and it will pay off its current liabilities. The quick ratio is also a type of liquidity risk in here it will measure the metric values, and there will be a day’s payable outstanding which is known as credit risk (Kontar R. Z.-o.–2., 2017).

References

Stricker, N., Echsler Minguillon, F., & Lanza, G. (2017). Selecting key performance indicators for production with a linear programming approach. International Journal of Production Research, 55(19), 5537–5549. https://doi.org/10.1080/00207543.2017.1287444

RUSU, M., SOARE, I., BOTAN, M., DRAGOMIRESCU, A., & MILITARU, C. (2019). Key Performance Indicators to describe production activity with QTS-2 equipment. INCAS Bulletin, 11(3), 223–228. https://doi.org/10.13111/2066-8201.2019.11.3.19

Kontar, R., Zhou, S., & Horst, J. (2017). Estimation and monitoring of key performance indicators of manufacturing systems using the multi-output Gaussian process. International Journal of Production Research, 55(8), 2304–2319. https://doi.org/10.1080/00207543.2016.1237791

RESPONSE 2 :

Key Performance Indicator (KPI) is a strategy of measuring performance using a measurable value to evaluate how an organization is effectively achieving its key objectives (Ishaq Bhatti, Awan & Razaq, 2013). Through these indicators, organizations can monitor and track the success of their activities. On the other hand, Key Risk Indicator (KRI) is a metric used by organizations to measure and determine the level of risk of a particular venture or an activity they intend to undertake. These indicators measure risks and potential influences that the organization is exposed to. For an organization to come up with these indicators, it must set up well-defined strategies and goals so that the performance can be measured based on these goals. Also, the organization’s objectives must be clearly stated and look for possible risks that can affect these objectives (Parmenter, 2015).

A top-down indicator is a KPI approach where business decisions are made first then data to support these decisions follows. Here, actual business users must be involved. An example of a top-down approach is where an organization first decides on the cost of a project and then the amount is divided amongst the work packages (Parmenter, 2015). On the other hand, bottom-up indicators is where operational risks are analyzed from the business activities.  For example, an organization estimates the total cost of a project using the lowest level work packages,

Key performance indicators are very useful in assisting the organization monitor its operational efficiency (Ishaq Bhatti, Awan & Razaq, 2013). The operations are monitored so that an organization can increase or stop activities which bring worse or better expected results. KRI on the other hand, helps an organization to have a better understanding of potential risks. Also, it helps the organization to adopt more reliable strategies to minimize potential risks (Parmenter, 2015).

There are other key indicators like key results indicator which is a metric that is used in measuring quantitative results (Parmenter, 2015). The actions of a business to help in tracking progress as weal reaching organizational goals. Are there any other key indicators that would help an organization?

References

Ishaq Bhatti, M., Awan, H., & Razaq, Z. (2013). The key performance indicators (KPIs) and        their impact on overall organizational performance. Quality & Quantity, 48(6), 3127-    3143. doi: 10.1007/s11135-013-9945-y

Parmenter, D. (2015). Key performance indicators: developing, implementing, and using winning KPIs. John Wiley & Sons.